FCA: Millions lack confidence in financial services as consumer duty looms

In its latest Financial Lives survey, published yesterday (July 25), the FCA found that just over a third of people believe most financial firms are honest and transparent in the way they treat them.

In addition, an estimated 7.4mn people tried, but were unsuccessful, when trying to get in contact with their financial services providers in the 12 months before May 2022.

While more than 3mn people who did manage to contact a firm said they could not get the information or support they wanted.

However, there was a more positive picture when people were asked to rate their own provider rather than the sector in general. 

Jenny Davidson, commercial proposition director at Quilter, said the survey shows that the industry “continues to let down the most vulnerable in society”.

The survey revealed that 20 per cent of those with low financial resilience, and 20 per cent of those with low capability, reported that provider communications did not help at all, compared with 12 per cent of those with no characteristics of vulnerability.

“Vulnerability can be a deeply personal issue,” Davidson said. “Customers are unlikely to shout about it or may be unwilling to discuss it, so a crucial challenge for all companies is to identify customers on this spectrum of risk. 

“All employees of financial services firms must have the skills and capability to recognise and deal with customers who display signs of vulnerability, and the FCA has previously provided guidance on embedding fair treatment of vulnerable customers across businesses.”

Our consumer duty will guide our ongoing work to improve the way firms provide customer supportSheldon Mills, FCA

She argued that financial services firms can play a key role in helping those with additional requirements manage their finances. 

“Not all customers with characteristics of vulnerability will be vulnerable,” she said. “There are incidents of transient vulnerable people who, because of specific circumstances at a certain time, may not be able to make a complex decision. 

“Navigating financial choices whilst displaying a characteristic of vulnerability may at times feel like an unsurmountable challenge, and it is vital that firms do all they can to help people easily navigate their money choices.”

The regulator’s findings come only days away from the introduction of the consumer duty, which will require firms to act to deliver good outcomes for consumers and, in turn, help to improve trust and confidence in the financial services sector. 

Sheldon Mills, executive director, consumers and competition at the FCA, said: “Times like this show why it’s important people get the support they need as more people are likely turning to their financial services providers for help. 

“Our consumer duty will guide our ongoing work to improve the way firms provide customer support - getting through to your provider is the starting point for receiving help, so we will be working with them to improve in this area.” 

The FCA said action since the start of the cost-of-living squeeze has already led to an increase in the amount of engagement lenders are having with their customers.

Following conversations with firms and new guidance set by the FCA, lenders supported over 2mn mortgage customers to manage their finances in the past year, including through budgeting tools, access to debt advice, and tailored mortgage forbearance. 

'Still work to do'

While there have been positive steps taken, there is still work to do, the regulator said. 

Around 4.9mn people who used firm communications to help them make a decision in the 12 months before May 2022 found it did not help at all.

The FCA’s survey also found that an increasing number of people are choosing to use digital banking, payments and other online services, with almost nine in 10 adults (88 per cent or 42.9mn) banking online or using a mobile app in 2022, up from 77 per cent in 2017. 

While there is an increasing number of people regularly using digital services, the FCA said it recognises that many people are still heavy users of cash (6 per cent or 3.1mn) and reliant on face-to-face services. 

Conor D’Arcy, interim chief executive of the Money and Mental Health Policy Institute, said: “These disappointing findings highlight there’s still a huge gap between the help people need and what they’re getting from firms, despite recent efforts to encourage struggling customers to reach out. 

“As the cost of living crisis rumbles on, banks have to turn words into action and make sure that customers who are struggling - particularly those with mental health problems and other vulnerabilities - can get the support they need. 

“That includes making it as easy as possible to get in touch through a variety of channels - such as over the phone, online or face-to-face - and making sure that customers who get in touch are met with tangible offers of support.” 

D’Arcy said while he hopes the new duty “triggers the seismic shift that’s needed” to crack down on bad practice, whether that’s hard-to-access support or aggressive debt collection tactics, it’s vital that the regulator is on stand-by to enforce these new rules if firms don’t raise their game.

Through the Financial Services and Markets Act, the City watchdog said it will take on powers on access to cash and will expect firms to ensure that they meet all their customers' needs. 

sonia.rach@ft.com

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